Bradway's patient dealmaking brings Onyx to Amgen


Investment banker turned biotech chief executive, Robert Bradway, staked a claim as a savvy dealmaker with Amgen Inc's successful acquisition of Onyx Pharmaceuticals Inc for more than $10 billion.

In doing so, he managed to avoid falling into traps that an inexperienced CEO might make with the stakes so high, while potentially quieting some criticism over the choice of a former banker to lead the world's largest biotechnology company.

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"Because of his experience as an investment banker, he was able to avoid a lot of the mistakes that a lot of rookie CEOs make in acquisitions," said a source familiar with the sale process, who wished to remain anonymous because he is not permitted to speak to the media.

"He was very disciplined and was willing to wait effectively two months for the process to play out," the person added.

The deal gives Amgen an immediate new revenue stream, bolsters its drug development pipeline and places Amgen much more solidly into the oncology space, which features among the most high priced and highly sought after medicines in the healthcare industry.

Bradway, 50, who was a healthcare investment banker at Morgan Stanley prior to joining Amgen in 2006, replaced long-time CEO Kevin Sharer in May of 2012, after stints as vice president of operations strategy and chief financial officer.

Since taking the helm of Amgen, Bradway has engineered a handful of small deals to add to Amgen's experimental drug pipeline - the largest, a $1.16 billion acquisition of Micromet - but had primarily placated shareholders with share buybacks and increasing dividend payments.

While Amgen shares are up more than 60 percent on Bradway's watch - including a nearly 8 percent rise on Monday - many of the company's key products are mature or declining and likely to face competition from cheaper rivals over the next few years. Those who viewed Amgen as a growth company were clamoring for a big move.

Several of Amgen's current drugs offer supportive care for cancer patients, such as to treat anemia (Aranesp) or decreases in white blood cells caused by chemotherapy (Neupogen and Neulasta).

Another of its newer medicines, Xgeva, helps prevent fractures in cancer that has spread to the bone. It's one product that actually treats cancer, the colon cancer drug Vectibix, has largely been a disappointment.

"This is a bit of a bold stroke," Christopher Raymond, analyst at Robert W. Baird and Co, said of the Onyx purchase, which gives Amgen full rights to the new multiple myeloma drug Kyprolis as well as other assets. "I credit them for doing something ... they need growth."

Sven Borho, a founding general partner of OrbiMed Advisors LLC, which holds a substantial position in both companies, was pleased by the deal from both sides.

"Healthcare shareholders are relieved that Amgen management is doing something. Just paying a dividend and buying back your shares is not enough," Borho said.

"Finally they're seeing the light that you have to generate value for your shareholders not just by financial engineering but by creating future revenues. This was long, long overdue," Borho said.

OrbiMed owns about 2.6 million Amgen shares and nearly 1.2 million Onyx shares, according to Thomson Reuters data.

"Of all of the assets out there, Onyx was the quality oncology asset," said Borho.

Leerink Swann analyst Howard Liang agreed. "There are not that many opportunities where you can buy a fully-owned asset that moves the needle for Amgen," Liang said

Amgen had been criticized by some industry analysts for choosing an investment banker to run a company where science should be a priority.

"He's a real quick study ... takes a lot of interest in the science side of the business," one former Amgen executive, who asked that his name not be used, said of Bradway. "He understands that the basis of Amgen is innovation and science."

But the Bradway's investment banking background appears to have served him well as he oversaw the Onyx purchase process that began in June with Amgen's unsolicited takeover offer of $120 per share, which was rejected as too low. After Onyx sought competing bids, the deal eventually got done at $125 per share.

Some new CEOs may have just agreed to up their offer and overpay to make the deal happen quickly or walk away entirely, but Bradway did neither, said the person familiar with the deal.

"We had the benefit of spending considerable time with the Onyx team, coming to know and understand in particular Kyprolis very well through that process," Bradway told analysts on a conference call on Monday.

"We reviewed the data that are available to us and our confidence is reflected in the price that we've moved forward the transaction with," said Bradway, adding that Amgen will still be able to generate strong cash flow and have the flexibility to do smaller bolt-on deals in the United States, with even more flexibility outside the U.S.

OrbiMed's Borho said it was a big win that Amgen got the prize it sought without being forced to drive up its initial offer by too much.

"They played it quite well looking from the outside in," he said. "Investment bankers on both sides tried to spread rumors either to hold back the price or ratchet the bids up, and in the end Amgen was able to get the deal done without overpaying."

He said biotech merger and acquisition activity has been a boon to the acquirers and shareholders, citing Bristol-Myers Squibb's purchase of Medarex and its melanoma drugs, and Gilead Sciences' acquisition of Pharmasset to gain its highly promising hepatitis medicines, as potentially company transforming moves.

"Big companies so many times are so worried about making a mistake acquiring assets too early. But the ones that work can generate so much shareholder value and that's what all the healthcare dedicated investors want them to do," Borho explained.

"Take a risk. At least step up to the plate and take a swing and get some assets to grow your company," he added.

(Additional reporting by Jessica Toonkel in New York; Deena Beasley in Los Angeles and Susan Kelly in Chicago; Editing by Carol Bishopric)